Introduction The petroleum industry in India is a classic example of the strides

made by the country in its march towards economic self-reliance. At the

time of Independence in 1947, the industry was controlled by international

companies. Today, a little over 50 years later, the industry is largely in the

public domain with skills and technical know-how comparable to the highest

international standards. The testimony of its success in the past five decades

is the significant increase in crude oil production from 0.25 to 33 million

tons per annum (MMTPA). The consumption of petroleum products has

grown 30 times in the last 50 years from 3 million tons during 1948-49 to

about 91 million tons in 1998-99. A vast network of over 29,000 dealership

and distributors has developed and backed by over 400 storage points over

the years to serve the people even in the remote and once-inaccessible areas.

In the 50 years since independence India has witnessed a significant

growth in the refining facilities and increase in the number of refineries from

one to seventeen now. During the first decade of Independence (1947-57)

three coastal refineries were established by multinational oil companies

operating in India at that time. They were Burma shell, Esso Stanvac and

Caltex; the first two at Mumbai and the third at Visakhapatnam.

The second decade (1957-67) witnessed the setting up of Indian

Refineries Ltd in 1958, a wholly-owned public sector Government company.

Under its banner three refineries were set up at Guwahati (Assam), Bahraini

(Bihar) and Koyali (Gujarat) essentially to process the indigenous crude

discovered in Assam and Gujarat. Also, one joint sector refinery was set up

with the participation of an American company at Cochin based on imported

crude.

The next ten year period (1967-77) witnessed the establishment of two

refineries, one with equity participation from American and Iranian

companies at Chennai and another in the public sector at Halide by Indian

Oil.

Two more refineries in the public sector have been commenced in the

period 1977-87. The refinery at Bongaigon was the first experiment in

having an integrated petroleum refinery-cum-petrochemicals unit. The other

refinery was set up at Matura in 1982. Major expansions of the coastal

refineries at Mumbai, Cochin, Chennai and Visakhapatnam were also

completed during this period.

During the fifth decade (1987-97), a small refinery of 0.5 MMTPA

Nagappatinam was built in TamilNadu. In 1996, at three MMTPA refineries

built in the joint sector at Mangalore HPCL and India Rayon. This decade

also saw significant expansions of the capacities of the existing refineries,

thereby the refining capacity to about 62 MMTPA.

HISTORY

Chennai Petroleum Corporation Limited (CPCL), formerly known as

Madras Refineries Limited (MRL) was formed as a joint venture in 1965

between the Government of India (GOI), AMOCO and National Iranian Oil

Company (NIOC) having a share holding in the ratio 74%: 13%: 13%

respectively. Originally ,CPCL Refinery was set up with an installed

capacity of 2.5 Million Tonnes Per Annum (MMTPA) in a record time of 27

months at a cost of Rs. 43 crore without any time or cost over run.

In 1985, AMOCO disinvested in favour of GOI and the shareholding

percentage of GOI and NIOC stood revised at 84.62% and 15.38%

respectively. Later GOI disinvested 16.92% of the paid up capital in favor of

Unit Trust of India, Mutual Funds, Insurance Companies and Banks on 19 th

May 1992, thereby reducing its holding to 67.7 %. The public issue of CPCL

shares at a premium of Rs. 70 (Rs. 90 to FIIs) in 1994 was over subscribed

to an extent of 38 times and added a large shareholder base.

As a part of the restructuring steps taken up by the Government of

India, IndianOil acquired equity from GOI in 2000-01. In July 2003, NIOC

transferred their entire shareholding to Naftiran Intertrade Company

Limited, an affiliate, in line with the Formation Agreement, as part of their

organizational restructuring. Currently IOC holds 51.89% while NICO holds

15.40%.

CPCL has two refineries with a combined refining capacity of 10.5

Million Tonnes Per Annum (MMTPA). The Manali Refinery has a capacity

of 9.5 MMTPA and is one of the most complex refineries in India with Fuel,

Lube, Wax and Petrochemical feedstocks production facilities. CPCL's

second refinery is located at Cauvery Basin at Nagapattinam. This unit was

set up in Nagapattinam with a capacity of 0.5 MMTPA in 1993 and later

enhanced to 1.0 MMTPA.

The main products of the company are LPG, Motor Spirit, Superior

Kerosene, Aviation Turbine Fuel, High Speed Diesel, Naphtha, Bitumen,

Lube Base Stocks, Paraffin Wax, Fuel Oil, Hexane and Petrochemical feed

stocks. The Wax Plant at CPCL has an installed capacity of 30,000 tonnes

per annum, which is designed to produce paraffin wax for manufacture of

candle wax, waterproof formulations and match wax. A Propylene Plant

with a capacity of 17,000 tonnes per annum was commissioned in 1988 to

supply petrochemical feedstock to neighbouring downstream industries. The

unit was revamped to enhance the propylene production capacity to 30,000

tonnes per annum in 2004. CPCL also supplies LABFS to a downstream unit

for manufacture of Liner Alkyl Benzene.

The crude throughput for the year 2008-09 was 10.12 million metric

tonnes (MMT). The company’s turnover for the year 2008-09 was Rs

36489.67 crores and the Profit after Tax was (Rs.397.28 crores).

The Company has not declared any dividend for the year 2008-09 in

view of the net loss incurred during the financial year.

Introduction Working Capital Management

Working Capital Management is concerned with the problems that

arise in attempting to manage the current Assets, current liabilities and the

inter-relationship that exists between them. The aim of working capital

management is to manage the concerns current assets and current liabilities

in such a way that an adequate working capital is maintained. An adequate

level of working capital provides a business with operational flexibility.

Emerson has very rightly observed that, “business with an adequate level of

working capital has more option available to it, and can make its own choice

as to when working capital will be used. On the other hand, if a firm is short

of working capital, it may be forced to limit business operations, extension

of credit to customers and the amount that it invests in inventory. This will

adversely affect production as well as sales which in turn will affect

probability of a concern.”

Meaning and definition

There is no universally accepted definition of Working Capital, but

the one most widely acceptable is the observation that ‘Working Capital’

represents the excess of current assets over current liabilities.

Although the term ‘Working Capital’ has been depreciated by the

Institute of Chartered Accountants for use in balance sheets and has

preferred the term ‘current assets less liabilities’ nevertheless, for

management purposes the former is useful phrase to summarize the factor,

which is effective lifeblood of much business.

Importance

Study of working capital is of major importance to internal and

external analysis because of its close relationship to current day-to-day

business. Inadequacy or mismanagement of working capital is the leading

cause of business failure. Choyal is of the view that, “The working capital of

a firm is the lifeblood which flows through the veins and arteries of the

structure, Indeed, it engages every part of the structure, gives courage and

moral strength to brain (management) and muscles (Personnel), digests to

the best degree the raw material used by its constant and regular flow and

returns to the heart (Cash flow) for another journey and so when working

capital is lacking or slows down, the financial bodies have value just as

much as junk.”

It is reflected by the fact that Financial Manager spends a great deal of

time in managing current assets and current liabilities. Arranging short term

financing, negotiating favorable credit terms, controlling, administering

accounts receivables and monitoring the investment in inventories consume

a great deal of their time.

In the words of I.M.Pandey: “The net Working Capital indicates

The liquidity position of the firm.

Suggests the extent to which working capital needs may be financed

by permanent sources of funds.”

INDUSTRY PROFILE

At present, there are seventeen refineries operating in the country,

fifteen in public sector unit, and one in private sector. Out of the public

sector refineries seven refineries are owned by Indian Oil Corporation, two

by Hindustan Petroleum Corporation Limited, two by Chennai Petroleum

Corporation Limited and one each by Bharat Petroleum Corporation

Limited, Kochi Refineries Limited, Bongaigaon Refineries and

Petrochemical Limited and Numaligarh Refineries Limited. The one

Refinery in joint sector Mangalore Refineries and Petrochemicals Limited

and one by private sector Reliance Petroleum Limited.

The installed capacity of the Indian refineries is about 117 million

tonnes per annum from which the product availability may be about 108

million tonnes. Taking into account the product availability from the

fractionators of about 4.5 million tonnes, the total products availability

would be about 113 million tonnes at 100% capacity utilization. While this

is on overall basis, product like LPG is in deficit and other products are in

surplus, which would necessitate operating refining capacity to match

demand or export products depending on refinery economics and logistics.

During the year, as a part of reconstructing of downstream oil sector,

KRL and NRL have become the subsidiaries of BPCL. Government of India

has sold its entire shareholding in BRPL and CPCL to IOCL. Thus, BRPL

and CPCL have become subsidiaries of IOCL.

By this arrangement, the refineries have to face the challenge of

deregulation, for which the Government of India has already taken measures

like phased dismantling of Administered Pricing mechanism for refinery

sector, particularly marketing deregulation etc. As per the current program

contemplated by the government, the marketing of controlled products has

been de regulated from 1.4.2002.

INDUSTRY STRUCTURE

As part of the deregulation of the oil sector as notified by the

Government of India in 1997, the oil sector was deregulated in phases. The

refining sector was deregulated in the first phase from 1.4.1998. The oil

sector has since been totally deregulated from 1.4.2002. The year 2002-03

was the first year of operation of the oil sector in the deregulated scenario

and the prices to the customers were fixed by and large on import parity

(IPP) basis.

In the liberalized business scenario, CPCL has completely switched

over to Market Driven Pricing Mechanism (MDPM) from APM, ie.

Administered Pricing Mechanism.

NEED FOR THE STUDY

The study is needed to analyze the working capital management of the

company.

The study is being carried out, as it is necessary to identify the over

utilization or under utilization of assets to the turnover of the

company.

It is also necessary to identify the idle assets and non-utilization of

funds.

It is necessary to identify the ‘liquidity dimension of Working Capital’

and the ‘Profitability’.

OBJECTIVE OF THE STUDY

Primary

To Know the Financial Performance of Birttania Industry Ltd.

Secondary Objective To know about the Introduction of Birattania Industry ltd

To know about the History of Birattania Industry ltd

To know about the Company Profile of Birattania Industry ltd

To know about the Financial Analysis of Birttania Industry Ltd.

To know about the Financial Performance of Birttania Industry Ltd

SCOPE OF THE STUDY

The study finds out the operational efficiency of the organization and

suggests the proper utilization and allocation of cash resources, to

improve the efficiency of the organization.

The working capital of the organization will be further revealed

through the adoption of various techniques available for analysis.

These techniques reveal the measures that can adopt to improve the

existing trend

LIMITATION OF THE SYUDY

The study will be carried out mainly based on the information

gathered from the Secondary Data mainly Balance Sheet and Profit

and Loss Account.

The study will be limited to observations of the past. The observation

made will be related to laws operated in the past.

Sufficient data will not be made available to study the current

operations being carried out in the company.

The company being under the control of Indian Oil Corporation and in

the direct administration of the government, it is not in a position to

enjoy the full control of ownership. It is also not in a position to fix

prices for major products produced by it.

The study will not be carried out from the point of national policies,

economic crisis and emergence of war at the countries from which the

crude oil is being imported.

Research DesignIn the modern business environment, finance plays

a role in every organization. Financial Management is an integral

part of the overall management and is mainly concerned with fund

raising operations. At present most of the industrial undertakings

are faced with the problem of effective utilization of resources.

Working Capital is the major importance to internal and

external analysis because of its close relationship with the day-to-

day operations of a business. Working Capital is the portion of

asset of a business, which are used in or related to current

operations, and represented at any one time by the operating cycle

of such items as against receivables and cash.

The present study is an effort to analyze the working capital

management of Chennai Petroleum Corporation Limited over a

period of time and to provide adequate support for the smooth

functioning of the normal business operations of the company.

Hence, the analysis of working capital helps the management

to have knowledge of current asset required to business concern to

have continuous production. It also helps the finance manager to

know about the type of product, market share, attitude of the

management, cost of funds, inflation the demand and the stages of

business cycle.

Statement of the Problem

The present study seeks to collect in depth information of the working

capital management of Chennai Petroleum Corporation Limited with special

emphasis on an examination of the management performance in regard to

financial management. One among the reason the company could perform

well is the efficient management of the

company’s working capital, which automatically includes inventory, account

receivables and cash i.e., the proper management of working capital has

brought access to this company. The present study undertakes to deal with

the net concept of working capital i.e., excess of current assets over current

liabilities.

Research MethodologyThe project study mainly focuses on the critical assessment of

Working Capital Management of Chennai Petroleum Corporation Limited

and deals with the liquidity dimension of working capital and the

profitability.

Research Design

Research is an organized activity focused on specific objective with

the support of data collection involving tools for analysis deriving logically

sound inferences.

Research Design is purely and simply the framework or plan for a

study that guides the collection and analysis of data. The function of

researcher is to ensure that requires the data collected or accurate and

economically.

Primary Data

As a part of strengthening the study, personal contacts are made with

the officials and staff members of finance department in the form of

discussions and collection of reports.

Secondary Data

The Secondary Data are collected from Annual Reports, mainly

Balance Sheet, Income and Expenditure and other brouchers of the

company.

Method of Collection

The data for the analysis are collected and gathered from the printed

reports of Chennai Petroleum Corporation Limited like annual reports,

official files, records and other available related material.

Period of Study

The period of study will be carried out from last five financial years

i.e., from 2000 – 2005.

Tools and techniques for collection of data

Ratio analysis and interpretation

Statement of changes in working capital

Common size balance sheet analysis

Comparative balance sheet statement

Statistical Tools Implemented are

Z-Score analysis

Regression analysis

Ratio Analysis

Current Ratio:

Current Assets, Loans & Advances

Current Ratio =

Current Liabilities & Provisions

This ratio measures the solvency of the company in the short-term.

Current assets are those assets, which can be converted into cash within a

year. Current liabilities and provisions are those liabilities that are payable

within a year. A current ratio of 2:1 indicates a highly solvent position.

Quick Ratio or Liquid Ratio:

Current Assets, Loans & Advances - Inventories

Quick Ratio =

Current Liabilities & Provisions – Bank Overdraft

Quick ratio is used as a measure of the company’s ability to meet its

current obligations. Since bank overdraft is secured by the inventories, the

other current assets must be sufficient to meet other current liabilities. A

quick ratio of 1:1 indicates highly solvent position. This ratio is also called

the acid test ratio. This ratio serves as a supplement to the current ratio in

analyzing liquidity.

Comparative Balance Sheet Statements:

The comparative balance sheet analysis is the study of the trend of the

same items, group of items and computed items in two or more balance

sheets of the same business enterprise on different dates. The changes in

periodic balance sheet items reflect the conduct of a business. The changes

can be observed by comparison of the balance sheet at the beginning and at

the end of a period and these changes can help in forming an opinion about

the progress of an enterprise.

Balance sheets as on two or more different dates are used for

comparing the assets, liabilities and the net worth of the company.

Comparative balance sheet analysis is useful for studying the trends of an

undertaking.

Advantages

Comparative statements help the analyst to evaluate the performance

of the company.

Comparative statements can also be used to compare the performance

of the firm with the average performance of the industry between

different years.

It helps in identification of the weaknesses of the firm and remedial

measures can be taken accordingly.

Common Size Balance Sheet Analysis:

A statement in which balance sheet items are expressed as the ratio of

each asset to total assets and the ratio of each liability is expressed as a ratio

of total liabilities is called common size balance sheet. The figures are

shown as percentages of total assets, total assets and total liabilities. The

total assets are taken as 100 and different assets are expressed as a

percentage of the total. Similarly, various liabilities are taken as a part of

total liabilities.

The figures shown in financial statements viz., Balance Sheet are

converted to percentages so as to establish each element to the total figure of

the statement and these statements are called Common Size Statements.

These statements are useful in analysis of the performance of the company

by analyzing each individual element to the total figure of the statement.

These statements will also assist in analyzing the performance over years

and also with the figures of the competitive firm in the industry for making

analysis of relative efficiency.

Operating Cycle Analysis:

A new concept, which is gaining more and more importance in recent

years, is the ‘Operating Cycle Concept’ of Working Capital. The operating

cycle refers to the average time elapses between the acquisition of raw

materials and the final cash realization.

Operating Cycle consists of four stages:

The raw materials and stores inventory stage.

The work-in-progress inventory stage.

The finished goods inventory stage.

The receivable stage.

Regression Analysis :

A fundamental and versatile research technique that seeks to explain

an outcome (dependent) variable in terms of multiple predictor

(independent) variables. This analysis reveals the nature and strength of the

relationship between each predictor variable and the outcome, independent

of the influence from all other predictors. The term typically refers to

Ordinary Least Squares (OLS) regression, which models a linear

relationship among variables.

Z -Score Analysis:

The dozens of financial ratios seem to provide different answers to the

same simple question of “How will a company do”. So, everyone is on the

lookout for financial models that summaries one general aspect of overall

company performance. An example is the Z score, which reveals the

efficiency of working capital management.

The original Z score was created by Edward I Altman at New York

University in the mid 1960’s and it has stood as the test of time. Out of a

selection of 22 financial ratios. Altmann found 5 that could be combined to

discriminate between the bankrupt and non-bankrupt companies in this

study. The interesting thing about the Z score is that is good analytical tool

no matter what shape the company is in. Even if the company is very

healthy, if the Z score to fall sharply, warning bells should ring.

The study is needed to identify the current position of the company

through Z-Score Analysis.

Analysis & Interpretation

Ratio Analysis and InterpretationCurrent Ratio:

(Rs. In Lakhs)

Year Current As-

sets

Current Lia-

bilities

CA/CL

2000-2001 172673.84 64712.16 2.67

2001-2002 157667.36 71938.55 2.20

2002-2003 211078.23 119000.23 1.77

2003-2004 203573.14 115980.27 1.75

2004-2005 361170.40 208989.37 1.73

Graphical representation of change of direction of current ra-

tio

InterpretationThe ideal ratio between current assets and current liabilities is

2:1. This is insisted because even if current assets are reduced to

half i.e., 1, the creditors will be able to get their dues in full. Here,

the ratio is showing a decreasing trend, which may be due to rise in

production.

Quick Ratio:(Rs. In Lakhs)

Year Quick As-

sets

Quick Liabili-

ties

QA/QL

2000-2001 86710.09 64712.16 1.40

2001-2002 81962.52 71938.55 1.14

2002-2003 90770.42 119000.23 0.76

2003-2004 83259.81 115980.27 0.72

2004-2005 119554.60 208989.37 0.57

Graphical representation of change of direction of quick ratio

InterpretationThe ideal quick ratio is 1. Here, the analysis shown as de-

crease trend due to increasing inventory level which has resulted in

increase in current liabilities. When there is no corresponding in-

crease in liquidity of current asset, where as the current liabilities

as gone up. The quick ratio is tend to decrease since the company

is in an oligopolystic market, the company is in an position to liq-

uidate its current asset and gain an recovery of money within short-

est possible time. The downward trend in the quick ratio therefore

has no significant and is not representational.

Common size Balance Sheet AnalysisValues in %

Particulars 2000-

01

2001-02 2002-03 2003-

04

2004-05

Liabilities

a) Current Liabilities

Current liab.

Provisions

18.7

2.6

19.9

2.1

21.4

3.7

19.2

1.9

26.4

3.3

Total

b) Shareholders Funds

Capital

Reserves & Surplus

21.2

4.9

36.1

22.0

4.5

27.5

25.1

3.1

24.2

21.2

2.7

26.7

29.7

2.1

26.3

Total

c) Loan Funds

Secured Loans

Unsecured Loans

41.0

1.1

36.7

32.0

1.0

37.4

27.4

3.7

38.0

29.4

17.3

25.9

28.4

13.4

20.7

Total

d) Deferred Tax Lia-

bility

37.8

0.0

38.4

7.6

41.7

5.8

43.1

6.3

34.1

7.8

Total Liabilities 100 100 100 100 100

Assets

a) Net Fixed Assets

b) Intangible Assets

c) Investments

d) Current Assets

Inventories

Sundry Debtors

Cash & Bank Bal-

ances

Other Current Assets

Loans & Advances

42.3

0.0

0.6

28.2

7.9

2.9

0.6

17.1

50.3

0.0

1.0

23.1

11.2

5.1

0.6

8.1

54.9

0.0

0.5

25.4

12.9

0.2

0.0

6.1

62.6

0.0

0.2

21.9

9.6

0.2

0.0

5.4

47.7

0.8

0.1

34.3

12.7

0.1

0.0

4.2

Total

e) Misc. Expenditure

56.7

0.5

48.1

0.6

44.6

0.0

37.1

0.0

99.9

0.1

Total Assets 100 100 100 100 100

InterpretationIn common size balance sheet analysis in CPCL, it is found that the

total assets and liabilities are taken as 100% total and other components of

assets and liabilities are also expressed in terms compared to total asset and

total liability. The total capital % shows a decreasing trend for the last two

years.

There is also a decline in reserves & surplus in the last few years due

to introduction of AS-22. The percentage of loan funds is increasing which

states the availing of fresh loan from the year 02 to 04 for the purpose of ex-

pansion of the business.

The total net worth has decreased by 10%, which is because of fluctu-

ation in the reserves & surplus. The company adopted regrouping of certain

loans and advances under crude oil loan transaction in line with industry’s

practice of representing the same. This has vitiated the trend in current liabil-

ities from the old years.

Fixed assets have increased in figures during all the years of study. It

is due to a part of current liability arrives net profit have contributed to the

increase in fixed assets.

The current asset part has considerably decreased since 2000 and it is

due to decrease in loans and advances. There is no decrease in inventory; it

is because the company is doing mass production, so as to reduce the pro-

duction cost.

STATEMENT OF CHANGES IN WORKING CAPITALChanges in Working Capital – (2000-2001)

Particulars 2000 2001 Increase Decrease

Current Assets & Adv.Cash and Bank Balance 3472.49 8737.72 5265.23Inventories 96357.04 85818.49 10538.55Sundry Debtors 21729.98 24179.85 2449.87Other Current Assets 1631.95 1922.63 290.68Loans and Advances 53521.68 52015.15 1506.53

Total Current Assets (A)

176713.14 172673.84

Current liabilities, Prov.Current liabilities 63214.58 56895.41 6319.17Provisions 25948.01 7816.75 18131.26Total Current Liability (B)

89162.59 64712.16

Net Working Capital (A-B)

87550.55 107961.68

Net Increase in Working Capital (B/F)

20411.13 20411.13

Total 107961.68 107961.68 32456.21 32456.21Interpretation

In the year 2001, the inventory level is reduced because of low pro-

duction. The sundry debtors increased considerably indicating more credit

being given to the customers. The cash and bank balance increased because

of non-utilization of funds. The total current assets decreased because of de-

crease in inventory level. The current liabilities decreased because of repay-

ment of loans.

Changes in Working Capital – (2001-2002)

Particulars 2001 2002 Increase Decrease

Current Assets & Adv.Cash and Bank Balance 8737.72 16584.45 7846.73Inventories 85818.49 75704.85 10113.64Sundry Debtors 24179.85 36822.23 12642.38Other Current Assets 1922.63 19.89 1902.74Loans and Advances 52015.15 28535.94 23479.21Total Current Assets (A)

172673.84 157667.36

Current liabilities, Prov.Current liabilities 56895.41 65211.73 8316.32Provisions 7816.75 6726.82 1089.93Total Current Liability (B)

64712.16 71938.55

Net Working Capital (A-B)

107961.68 85728.81

Net Increase in Working Capital (B/F)

22232.87 22232.87

Total 107961.68 107961.68 43811.91 43811.91

InterpretationIn the year 2002, the inventory level is reduced because of not holding

up the inventory. The sundry debtors increased considerably indicating more

credit being given to the customers. The cash and bank balance include a

sum of Rs.162 crores in Term deposits that are earmarked for certain short

term obligations maturing with in 2-3 days like payment towards purchase

of crude oil. The loans given were reduced because of utilization of funds

for production purposes. Changes in Working Capital – (2002-2003)

Particulars 2002 2003 Increase Decrease

Current Assets & Adv.Cash and Bank Balance 16584.45 901.28 15683.17

Inventories 75704.85 120307.81 44602.96Sundry Debtors 36822.23 60991.45 24169.22

Other Current Assets 19.89 10.41 9.48Loans and Advances 28535.94 28867.28 331.34

Total Current Assets (A) 157667.36 211078.23

Current liabilities, Prov.Current liabilities 65211.73 101381.83 36170.10

Provisions 6726.82 17618.40 10891.58Total Current Liability

(B) 71938.55 119000.23

Net Working Capital (A-B) 85728.81 92078.00

Net Increase in Working Capital (B/F) 6349.19 6349.19

Total 92078.00 92078.00 69103.52 69103.52Interpretation

In the year 2003, cash and bank balance reduced indicating lesser liq-

uidity position of the company. However, it shows the best management of

surplus funds. The inventory level is raised because of increase in produc-

tion. The sundry debtors are increasing because of rise in sales level. Loans

given were increased slightly. The total current liabilities are increased be-

cause of rise in the level of borrowings made by the business.

Finding

The profits achieved by the company shows an increasing trend

because of increase in sales and reduction in interest charges for

funds borrowed by the company.

The average collection period of the company is showing an

increasing rend. This is because of rise in credit giving policy

made by the company that is limited for up to 30 days.

The average payment period is also started showing an increasing

trend indicating delayed payment being made to the creditors. This

indicates more time taken by the company to repay the suppliers.

However.

The current financial position of the company compared to the last

Five years is decreased slightly, which should be taken note.

SUGGESTION

The credit policy given can also be reviewed so that considerable

amount of funds may not and up locking in debtors. This will result

in increase of cash balances of the company.

Effective Costing Techniques may be implemented to control the

operating expenses incurred by the company.

Effective measure have to be carried out to resume the export of

petroleum products for the current year, which will add further

sophistication and low cost techniques of production.

The company may maintain the same Debt-Equity ratio in the future.

So that I can increase EPS.

For their new products. It is better to choose different debt mix that is

cheaper. An alternative proposal of External Commercial borrowings

will be cheaper for the company based on terms and conditions of the

foreign fluctuations etc.

CONCLUSION

To conclude that, Chennai Petroleum Corporation Limited has mobilized the funds in the same manner the funds are invested productivity in the capital asset as well as working capital. There is a sudden increased in market price during the year 2002-2003 which is because of better control from top-level management.

The company has a high operational efficiency, the profits for the company has increased over the past years which proves that the company has taken measure to generate profits by improving its capacity utilization which would maximize the generation of resources for expansion, growth and diversification.

There is a sudden increase in market price during the year 2002-2003 which is because of better control from top-level management.

The company may take efforts to increase its efficiency in taking control, since the government has dismantled the pricing of he product from 1.4.98

To end with, I conclude that if the company takes the above actions as suggested, the company would remain no one leader in the Indian Petroleum Industry in future, with its excellent past records.

BIBLIOGRAPHY

T.S. Reddy and Y. Hari Prasad Reddy, Financial and

Management Accounting, Margham Publications, 2002.

ICFAI. Financial Management, ICFAI, 1998.

Center for monitoring Indian Economy, Journal, December

2004.

C.R Kothari, Research methodology, Warsaw Publications,

2002.

Dr. S.N. Maheswari, Principles of Management Accounting,

11th edition, Sultan Chand & Sons, New Delhi, 1996.

Websites:

www.axisbank.com

www.google.com

Working Capital of CPCL

Working Capital Management is concerned with the problems

that arise in attempting to manage the current Assets, current liabilities and

the inter- relationship that exists between them. The aim of working capital

management is to manage the concerns current assets and current liabilities

in such a way that an adequate working capital is maintained. An adequate

level of working capital provides a business with operational flexibility.

Emerson has very rightly observed that, “business with an adequate level of

working cap ital has more option available to it, and can make its own

choice as to when working capital will be used. On the other hand, if a firm

is short of working capital, it may be forced to limit business operations,

extension of credit to customers and the amount that it invests in inventory.

This will adversely affect production as well as sales which in turn will

affect probability of a concern.” Hence working capital management is a

managerial accounting strategy focusing on maintaining efficient levels of

both components of working capital, current assets and current liabilities, in

respect to each other. Working capital management ensures a company has

sufficient cash flow in order to meet its short- term debt obligations and

operating expenses. Implementing an effective working capital management

system is an excellent way for many companies to improve their earnings.

The two main aspects of working capital management are ratio analysis and

management of individual components of working capital. A few key

performance ratios of a working capital management system are the working

capital ratio, inventory turnover ratio, creditors turnover ratio and debtors

turnover ratio. Ratio analysis will lead management to identify areas of

focus such as inventory management, cash management, accounts receivable

and payable management. The objective of the project hence is to analyze

how the company has been managing its working capital in the recent years

and its sources of finances to meet its financial obligations.Working Capital

can simply be defined as the excess of current assets over current

liabilities.Study of working capital is of major import ance to internal and

external analysis because of its close relationship to current day to day

business. Inadequacy or mismanagement of working capital is the leading

cause of business failure. Choyal is of the view that, “The working capital of

a firm is the lifeblood which flows through the veins and arteries of the

structure, Indeed, it engages every part of the structure, gives courage and

International Conference on Technology and Business Management March

18 moral strength to brain (management) and muscles (Personnel), digests to

the best degree the raw material used by its constant and regular flow and

returns to the heart (Cash flow) for another journey and so when working

capital is lacking or slows down, the financial bodies have value just as

much as junk.”It is reflected by the fact that Financial Manager spends a

great deal of time in managing current assets and current liabilities.

Arranging short term financing, negotiating favourable credit terms,

controllin, administering accounts receivables and monitoring the

investment in inventories consume a great deal of their time. In the words of

I.M.Pandey: “The net Working Capital indicates The liquidity position of

the firm. Suggests the extent to which working capital needs may be

financed by permanent sources of funds.”

AcknowledgementPreparing a project of this nature is an arduous task and I was

fortunate enough to get support from large number of person . I wish to

express my deep sense of gratitude to all those who generously helped in

successful completion of this report by sharing their invaluable time and

knowledge

It is my proud and previledge to express my deep regard to

Respected Dr. J.P.N . Pandey Principal , Dr Anand Tiwari, Dr. Navin

Gidion H.O.D. Department of Business Management, Govt. Girls P.G

College of Excellence Sagar, for following me to undertake this project.

I feel extremely exhilarated to have completed this project under

the able and inspiring guidance of Mrs. Shikha Urmil Khan. She

rendered me all possible help and guidance while reviewing the

manuscript in finalising this report .

I also extend my deep regards to my teachers , family members, friends

and all those whose encouragement has infused courage in me to

complete the work successfully.

Farheen Khan

BBA IIIrd Sem

Declaration

I declare that Project report titled “ Working Capital

Management in CPCL ” is my own works conducted under the

supervision of Mrs. Shikha Urmil Khan, Department of

Business Management, Govt. Auto Girls P.G College of

Excellence Sagar (M.P.) To the best of my knowledge the report

does not contain any work, which has been submitted for the award

of any Degree any where.

Farheen Khan

BBA IIIrd Sem

Certificate

The project report titled “ Working Capital Management in

CPCL ” is prepared by Miss. Farheen Khan B.B.A. (Hons.)

IIIsrd SEM under the guidance and supervision of Mrs.

Shikha Urmil Khan , for partial fulfillment of the Degree

B.B.A.

Signature of supervisor Signature Of Examiner

………………… …………………

Signature of H.O.D.

…………………

Preface

I am Pleased to present the project report on Working Capital

Management in CPCL before my respected readers. It is a

humble attempt from my part to judge the Working Capital

Management in CPCL, This study deals with a number of

topics that will help the reader understand and learn about

company

The research starts with a short Introduction History of

CPCL followed by the line of objective and research

methodology

Then comes the finding suggestions limitations and conclusions

of the research reports.

Language to report is sample lucid. Attempts have been made to

arrange the subject matter in a systematic and well-knit style.

Effort have also been made to deal with all topic precisely and

gently.

Farheen Khan B.B.A. IIIrd Sem.